Stake Review: AU’s Amazon for US Stocks
How Australians are buying stocks like Tesla and Apple from $10, like they buy toilet paper
Head of Startup Strategy
May 17 2021
Stake Review: In a nutshell, Stake provides a platform for Australians to buy securities in the US stock market effortlessly, commission-free, and in fractions.
Note: This article was first published on 16 July 2020 on Brioched and was updated with small changes in May 2021.
What’s the catch? How does Stake makes money without charging commissions or brokerage fees, when competitors like CommSec charge in excess of USD 19.95 per trade depending on trade sizes? If you’re a curious cat who wants to learn more, read on for a comprehensive Stake review from features and fees to competitors and conclusions.
What is Stake & why is it Australia’s Amazon for US Stocks?
Stake is a digital brokerage platform that was founded on the basis that trading in US equities in Australia is an arduous and expensive affair that leaves budding and even experienced investors frustrated.
Boasting over 300k users as of March 2021, Stake continues to grow as an increasing number of Australians try their hand at investing in the stock market, as part of a wave of new investors motivated by the slumps in global stock markets due to the effects of the COVID-19 pandemic and of course, GameStop.
Stake is fast becoming a household name for US stock investing in Australia, having appeared on GQ, Business Insider, Financial Review and Yahoo Finance, among many other sites.
It also announced a massive AUD 40m capital raise in May 2021.
Stake aims to change Australians’ experiences with trading in US-listed equities and exchange traded funds (ETFs) by providing a platform that allows investing in over 4k securities (stocks and ETFs) in a simple and affordable way through its app.
Fractional shares – I can buy $10 worth of Amazon stock?
Yes, Stake allows you to purchase fractional shares, which are fractions of a share, based on the proportion of what you invested over the price you bought it (e.g. you invested $100 into a share costing $200, you now own 0.5 shares in that company).
This is great for those who are newer to investing to dip their toes into the ocean, or even for those who like to own a piece of Buffett’s Berkshire Class A shares without having to fork out over USD 400k for a share.
The best part? This feature comes with no extra cost to users - the moment you sign up and get approved, you can invest your $1000 into a 100 different companies.
Commission free trading: what’s the catch? – Stake’s fee breakdown
Stake offers commission free trading, which means you don’t pay any brokerage fee or commission when you buy a stock (or part of one)!
However, don’t get caught out by this thinking you can start investing completely free of charge.
Stake does make money through money transfers, in and out of the app (and there are some other fees involved too).
So how does this all work?
Note: This might get a little lengthy because of the examples, which should help to provide a better picture of how the fees work practically.
Money transfers
- A foreign exchange (FX) fee of USD 0.7 for every AUD 100 transferred into or out of the app at the spot rate (not per trade; 70 bips).
- As of 6 March 2021, that’s approximately AUD 0.9, which means the FX fee costs about 0.9% of whatever you’re putting in or taking out.
- For example, if you’re transferring AUD 1k in, you’d end up with an account balance of the USD equivalent of AUD 991 (excluding other fees)
- As of 6 March 2021, that’s approximately AUD 0.9, which means the FX fee costs about 0.9% of whatever you’re putting in or taking out.
Other Fees (compulsory)
- US tax form completion
- Stake automatically provides, fills and submits a W-8BEN US tax form all its users for USD 5, which is charged upon your first funding.
- This tax form reduces the withholding tax for dividends you receive from US equities from 30% to 15% (ie your dividends are taxed less).
- Stake automatically provides, fills and submits a W-8BEN US tax form all its users for USD 5, which is charged upon your first funding.
Other fees (optional)
- Express funding
- If you’d like to have your funds cleared by the next US trading day instead of a day later, you have to pay a 0.5% fee.
- (if bank transfer) For example, if you’re transferring AUD 1000 on Monday 2pm AEST and you’d like your money in by Monday 9am ET (same day) instead of Tuesday 1pm ET, you pay around AUD 5.
- (if funding by card) For example, if you’re transferring AUD 1000 on Monday 2pm AEST and you’d like your money in premarket Monday (same day) instead of premarket Tuesday, you pay around AUD 5.
- If you’d like to have your funds cleared by the next US trading day instead of a day later, you have to pay a 0.5% fee.
- Third party USD transfers in
- If you already hold USD or prefer to convert to USD yourself using an external app, you can send USD to your Stake account, and you will be charged USD 5 upon it being cleared into your account each time you transfer in externally.
- Bank transfers
- You can transfer by POLi, a portal which connects Stake to your bank, or you can manually transfer the funds to Stake with its bank account information and a reference number.
- USD withdrawals
- When it comes time to cash out, Stake will charge a flat fee of USD 2 bank processing fee for all withdrawals, on top of the FX fee mentioned above.
Brokerage levels
Stake offers two types of ‘brokerage levels':
- Stake Starter (free)
- Unlimited free trades
- Fractional shares
- Stake Black (USD 90/yr (USD 7.5/mo) or USD 9/mo)
- Instant buying power on sell trades
- This means you can trade on unsettled funds instantly after selling – no need to wait for two days
- Buy & sell ratings from Wall St analysts
- Price targets on stocks from analysts
- Company financials and data (eg Earnings, EPS, Balance Sheet, etc
- Instant buying power on sell trades
Check out my in-depth analysis on whether you should upgrade to Stake Black!
What you won’t be charged for
- Brokerage fees when you buy and sell stocks
- FX fees per trade (only charged when you transfer funds with the app’s funding options [not with third party transfers in], or out)
- Purchasing fractional shares
- There are other minor regulatory fees and case-specific fees.
If you want to check out the full list of fees that may apply when using Stake, click here.
Is Stake safe – how do I know my money won’t just evaporate into thin air?
Now that you’re more or less privy to how fees operate on Stake, the next thing you’ll want to know is if your money, securities and data are safe with a company that was founded just 4 years ago in 2017.
Safety, security and regulation
Stake states it never touches your money, but acts only as the platform that allows you to transfer your money straight to:
- its ASIC (Australian Securities and Investments Commission) regulated FX partner, OFX, and then onto
- DriveWealth, its FINRA (Financial Industry Regulatory Authority) regulated US broker partner.
Furthermore, it claims your cash and securities are held in custody with Citibank, a world-renowned bank.
Stake also states it works with:
- Trulioo for identity verification and anti-money laundering
- Macquarie Bank for providing non-individual accounts eg corporate accounts
- Tiingo for the market and company data you see on the Stake app
- PoLi (AusPost) for online bank transfer funding of your account
In Australia, Stake is an authorised representative of Sanlam Private Wealth Pty Ltd, which has an Australian Financial Services licence.
ASX vs NYSE/NASDAQ (CHESS vs Custodian)
Note that the way securities are held in the US may differ from Australia, as brokerages like SelfWealth and CommSec in Australia offer CHESS sponsorship, which simply put, allow your Australian securities to be in your name on the ASX (Australian Securities Exchange) system, and not in custody of a third-party institution.
In the US, most securities bought through major brokerages are held in the custodian model, meaning the shares are held in custody on your behalf, rather than the securities being outright in your name on a share register.
With regards to the safety of your data, Stake claims that it works to meet the ‘highest standards of the privacy regimes in Australia’ and is also GDPR (General Data Protection Regulation) compliant as it is also a UK regulated firm. It doubles down on this by stating that all data is stored and encrypted with AWS (Amazon Web Services).
Insurance
Stake’s US broker partner DriveWealth is a member of the SIPC (Securities Investor Protection Corporation), which insures your securities for up to USD 500k and your cash for up to USD 250k if for any reason DriveWealth were to fail and enter liquidation.
If Stake were to go out of business, it claims DriveWealth and Citibank will establish access to all its customer’s cash and securities – nothing is lost.
How do I get started? – navigating the interface
Now that you understand that your money is safe and how much you’re actually going to pay in fees, it’s time to figure out how to use the app (you can trade on the website too).
Funding your account
You can fund your account under the last tab on the bottom in the ‘funds and balances’ setting.
Now you will have to wait for the funds to clear in your account, which depends on the speed option you chose.
As soon as the money clears in your account, you can start buying stocks of your picking.
If you’d like to get more hands-on for a better rate for your money, you can always fund your Stake account externally with a third party foreign exchange like Wise.
Searching for stocks
To search for stocks/ETFs, you can either use the search tab or the ‘WALLST’ tab, which shows a plethora of various stocks, including ‘most up’ and ‘most down’ in price, and popular searches on the app.
Buying stocks
Once you’ve found a stock that you want to purchase (Tesla above), you can just tap in and you’ll be provided the stock’s price movements over time, as well as other information like how many units you own and the average price you bought it at.
When you’re set, you can tap on the big green button labeled ‘Buy’ to start your purchase, and the process can’t possibly be easier.
On the buy page, you can see your ‘buying power’ on the top left, which shows you how much you are able to spend to purchase securities – usually funds that have been cleared and settled in your account, unless you’re on Stake Black.
You’ll be able to see the market price of one unit of the stock next to its ticker, in this case, USD 1544.65 next to Tesla’s TSLA ticker.
Types of orders
Stake offers the ability to change your order type between market buy, limit order and stop order when buying a stock.
A market buy will most likely execute at the ‘ask’ price, while limit and stop orders allow you to set a specific price to buy in at.
I would have to say my biggest pet peeve with the app is how it does not allow you to set a limit price for trading fractional shares – you’ll have to do a market order.
Note that fractional shares (anything that is not a whole number) can only be purchased at market price, and not with limit or stop orders.
Once you’re set with your configurations, just tap buy, and within seconds you’re the proud owner of some US securities.
App improvements
Day-trading and options trading
I don’t day-trade on the app, so I can’t speak to the improvements needed to be made for day traders or how Stake lacks the ability to purchase options.
However, I am waiting for the day Stake offers options, and I can only hope it comes sooner (and hopefully they won’t put it on Stake Black and make users pay extra just to use a basic functionality of many brokerages!).
Landscape mode and dark mode
Furthermore, it is mind-boggling how the app lacks a landscape mode for iPad (apart from the fullscreen list of holdings which shows in landscape) considering how Stake prides itself on being on the cutting edge of Fintech.
Dark mode would be a welcomed addition too, as the app is a huge splash of white that is definitely too harsh on the eyes in when trading when it is lights out.
How’s the competition?
So why should anyone use Stake? Here’s how their trading fees (buy/sell) compares to other brokerages (US securities):
| Brokerages | Type of Fee | Investment Amount | Fee to fund (Stake, IG) or trade (others) | Fees that may apply | Fee % of amount funded (Stake, IG) or trade (others) | Details on trading and other fees | Fee per USD 1k funding or trade | Fee per USD 10k funding or trade |
| Stake | FX | N/A | USD 0.7 per 100 AUD (70 pips) | N/A | Approx. 1% | Stake does not charge per trade, but per funding. Once you have funded your account, you can trade (buy/sell) unlimited times for free. | Approx. USD 10 | Approx. USD 100 |
| CommSec | Commission | USD 5k & below | USD 19.95 | USD 25/yr | Approx. 0.4% to 5.7% | An AUD 25 inactivity fee is charged when you do not trade for a year. | USD 19.95 | N/A |
| USD 10k & below | USD 29.95 | USD 25/yr | Approx. 0.3% to 0.6% | An AUD 25 inactivity fee is charged when you do not trade for a year. | N/A | USD 29.95 | ||
| Over USD 10k | 0.31% of trade | USD 25/yr | 0.31% | An AUD 25 inactivity fee is charged when you do not trade for a year. | N/A | N/A | ||
| Commission | AUD 1k and below | AUD 2 | N/A | Approx 0.2% to 4% | Technically not a full fledged brokerage to trade in US securities, as only one ETF on this platform is fully US stocks, and the others are AU/mixed. | N/A | N/A | |
| Over AUD 1k | 0.2% of trade | N/A | 0.2% | Technically not a full fledged brokerage to trade in US securities, as only one ETF on this platform is fully US stocks, and the others are AU/mixed. | Approx. USD 2 | Approx. USD 20 | ||
| IG | FX | N/A | USD 0.7 per AUD 100 (70 pips) | USD 50/qtr | Approx. 1% | You need to trade at least 3 times/quarter or hold no open positions at the end of the quarter. Once you have funded your account, you can trade (buy/sell) unlimited times for free. | Approx. USD 10 | Approx. USD 100 |
| CMC Markets | Commission | AUD 5k & below | USD 19.95 | N/A | Approx 0.57% to 5.7% | N/A | USD 19.95 | N/A |
| AUD 10k & below | USD 29.95 | N/A | Approx. 0.57% to 0.43% | N/A | N/A | N/A | ||
| Over AUD 10k | 0.31% of trade | N/A | 0.31% | N/A | N/A | Approx. USD 31 |
From Stake
Larger amounts
Overall, the cheapest per trade (not counting Stake and IG as they both have free trades) would be Pocket, at AUD 2/0.2%, but Pocket has a very limited selection of ETFs, most of which are not even ETFs fully comprising US stocks.
If you are looking to actually get some real exposure to the US securities market, CommSec seems to be the cheapest for one-time or just a few purchases over USD 5k, with CMC Markets coming in second.
Smaller amounts
However, if you would prefer to deal with smaller amounts and make more trades, Stake and IG do seem to be cheaper, as they offer unlimited free trades at about a 1% fee to fund your account.
Stake does edge out IG with the ability to buy fractional shares, and it also does not have any inactivity fees.
Does Stake help to manage my taxes?
For tax purposes, Stake has partnered with Sharesight, a stock portfolio tracker that allows you to calculate your Australian tax and record which categories your gains and income fall into for Australian tax filing.
This makes filing tax with foreign stocks simpler and easier.
Does Stake offer pre-market trading?
Unfortunately not at the moment.
Does Stake offer options trading?
Nope, just stocks.
Should you sign up for Stake?
Why you should
On the whole, Stake provides a superb platform for testing the waters of the US securities market, or even diving straight in, through its easy-to-navigate app, and ability to purchase fractional shares from $10 instead of whole stocks outright.
The lure of commission-free trading and reasonable instead of cutthroat fees coupled with secure trades executed in seconds with over 3.7k US securities to choose from doesn’t sound bad either.
Maybe not?
However, this is probably not the app for you if you’re sinking huge amounts at a time with no intention for multiple trades during a small time period and have no need for fractional shares or unlimited free trades.
Options trading is also unavailable with Stake at the moment, so you’ll have to check out other brokerages instead if you wanted to trade options with Stake.
The final nail in the coffin for some traders who fancy the occasional day trade is that even if you have a million in equities in your Stake account, you'll still have to sign up for Stake Black to trade on unsettled funds (which means if you don't, you'll always be waiting two days before you can use the proceeds from any sale).
How Australians are buying stocks like Tesla and Apple from $10, like they buy toilet paper
